12/11

5 Reasons Sirius/XM does not need to fear Pandora

Pandora and other online radio pure-plays want to be in the car, and that will mean trouble for Sirius/XM, right? After all, Pandora et. al. are free while Sirius/XM is not.

Not so fast.

Here are five reasons why that logic could be all wet:

1.  Sirius/XM is destination programming.  For Pandora, the destination is me.

That is, personalized radio services solve one problem really well, but they don’t solve all problems equally well.

Tons of Sirius/XM listenership is for professional sports, news and talk, or premium branded content like Howard Stern or Rosie or (now) Dr. Laura.

Just because I can make my own movie at home doesn’t mean I won’t look forward to Green Hornet in the theater, know what I mean?

2.  Pandora requires usage, while Sirius/XM only requires subscription

In other words, it doesn’t matter whether or not I use Sirius/XM – it only matters whether or not I pay for it. Ironically, Pandora’s utility is a function of my actual usage of it since there is no price point to factor into my decision-making.

And the beauty of being built into cars is that I don’t have to decide whether or not I want to subscribe to Sirius/XM – I only need to decide whether or not I want to DROP my subscription.  And as anyone who sells subscriptions will tell you, dropping a subscription you have is as hard as adding one you don’t have.

The Sirius/XM decision, therefore, weighs the cost of the service against one or two of the premium values listeners get from it.  That’s all it takes, just one or two.  That’s why, for example, HBO could air color bars all week long, but as long as it features a new episode of True Blood on Sunday nights (or whatever the hot show of the moment happens to be), I will keep my subscription until the end of time.

3.  Sirius/XM has a big head start in cars

Here are the recent stats on Sirius/XM’s penetration into the auto market:

The has satellite radio installed in approximately 60% of the vehicles sold, and almost 47% of consumers exposed to the service elect to become self paying subscribers after their promotional period ends.

That’s a big head start, no matter how many folks have Pandora et. al. installed on their mobile devices.

Plus, merging the technology in your pocket with the technology in your dash may not be hard, but any pain inspired by any amount of extra effort creates an obstacle to growth.  Compare that to…

4.  Sirius/XM is as easy to use as radio is (assuming you don’t have to install it yourself)

The fact that almost one out of two OEM subscribers sticks with the service after their trial ends compares to the tiny percentage of folks who walk into a Best Buy, play with a Sirius radio, and walk out with one in a bag. Installation is a pain in the neck.  But not saying “no” to your subscription and flipping a switch on the same dash that already contains your radio is easy.

Further, as brainless as the Pandora process is, it’s still more work to create a series of stations and tailor them to your tastes than it is to punch a button or even a series of buttons on your dash, just like we’ve done for generations.

And even if you argue it isn’t harder, it sounds harder to the uninitiated.

5.  Sometimes you want someone else’s channels, not yours

As I have long argued, having a bunch of choices rounds to infinite choices. That is, for most folks it’s not about creating a custom this or that, it’s about putting in a small amount of work to get a “good enough for me” content stream.  As with all decisions, consumers will measure the effort against the value of that effort, and customization’s value must be worth its cost in terms of effort.

For some, it just isn’t.  Especially when they’re trying to drive from here to there.

Sometimes, good enough really is good enough.  And I’d prefer you to do the work so I don’t have to.

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  • Ric Hansen

    Not to forget the human element that Sirius/XM provides. The music shows for the most part, come complete with a companion and a sense of connection with the outside world. Not just a music player. I have come to know and like the Morning Mash up crew on Sirius hits one. Music, fun and still no commercials. This comes from a long time terrestrial radio guy

  • David K.

    I agree the human element is what radio is all about. The feeling being apart of a community, talking with your friends about what happened on a show or gaining insight from the DJ's. The modern muzak services or mp3 on shuffle don't provide this. Morning Mash, Howard Stern, Jay Thomas, Vin Scelsa's Idiot's Delight, Meg Griffin, My Roots are Showing, NPR shows like Car Talk and Wait, Wait, Don't Tell Me are a just few that provide added value. I look to the programming to introduce me to new and interesting things providing background on a new group or what an old is up to for example. Pandora, Slacker, and others are great if you just want streaming uninterrupted music basically a modern version of muzak with artificial intelligence personalization.

    The other part that SiriusXM has over the current state of cellular mobile live stream content is coverage. You can drive from coast to coast and encounter very limited service dropout with SiriusXM. Cellular outside highly populated areas has limited coverage.

  • MUSCLE13

    Mark – When Pandora gets into the dash how will they make money? I presume it will be audio commercials. Correct? Tough to click on a banner ad while driving.

    How does Pandora compete with Sirius if it ends up imitating the terrestrial commercial laden model?

  • http://www.markramseymedia.com Mark Ramsey

    Good questions. And I will answer even though I'm taking this week off! :-)

    It will be a combination of sponsorship and advertiser supported content. I would argue it should also be a plethora of content more closely related to the Pandora brand and not necessarily the radiocentric model of ads-only.

    For example, if an auto brand can host a concert event, why can't Pandora?

    They have only begun to scratch the surface of value in that brand name.

    To your other questions….

    Interaction while driving is not that tough. A click is really a touch – or even a verbal command. Both of which are part of the driving experience already.

    Pandora will not end up imitating the commercial laden model. They will always limit the commercial load compared to the broadcast model. Plus, they add value to the equation (from customization) that no broadcaster facilitates today.

    Thanks for the question!